8 Strategies For Investing In Shares

Investing in buying shares at the Nigerian stock exchange is a task many people want to accomplish. The present economic crisis have created a lacuna of doubt in the mind of some who are very cautious and never want to get their fingers burnt. The news media is already awash with tales of woe of investors who have suffered great loss since the bears started reigning.

This article is for those who want to continue to invest in shares and keep on searching for strategies that will guarantee they make more money from shares in the Nigerian stock exchange.
The ideas i'm going to share with you here are the insight I got from one of my mentors. If you apply these strategies, you will discover the age long secrets of making great profits investing in the Nigerian stock market.

Strategy 1: Set A Clear Objective For Investment

This is where you must beging. For what purpose do you want to invest? What horizon of time do you have in view? Do you want to invest for short term or long term? When you make profit, what are you going to do with it? Short term investors are not interested in the fundamentals of companies that is why they are called speculators. A long term investor should ensure that the investments made are in strong companies with impressive fundamentals. They must be companies you are sure cannot go out of business in the nearest future.

Strategy 2: Acquire Knowledge

The vocabulary of investing in shares should be at your finger tips. Your learning curve must be continously upgraded to stay ahead of the average individual if you really want to make money investing in shares in the Nigerian stock market. Investing in shares is just like any other business. Your search for knowledge should include common terms relating to shares, government policies, world economics, finance and commodities just to mention a few. Regular subscription to investment publications and stock market news should be an acquired hobby.
You should also be interested in knowing what is making prices to go up or down. Don't invest in any company you know little or nothing about. That is a bad investment strategy and can take you to the slaughter house. Be interested in the management of the companies and the individuals calling the shots. What's their history? One thing you must never forget is that winners in this business spend substantial amount to acquire investment education.

Strategy 3: Buy Right And Sell Right

Many people get it wrong here. There is no how you can profit from shares if you miss the right time to buy or sell. Astute investors made good money and exited the market before the bears began to reign in May 2008. Money is really made when you buy a stock when its market price is below its real worth. You will then wait until it gets to a level where you can sell and make a tidy profit. There is no way you can make profit when you buy shares when they are most expensive. That was the great investment mistake countless investors made in 2008. The result was fatal in some instances. Remember that a reknown stock broker died on the floor of the exchange when the prices continued to slide. His company was engrossed in margin debt.

Strategy 4. Ascertain The Level Of Exposure You Are Ready To Accommodate

There is a rule of thumb you must keep at your finger tips as an investor in the Nigerian stock market although this rule could be adopted universally. This rule will greatly influence your investment decisions and guide the risk you can take in any investment. It is a profitable rule for portfolio management. What is the rule?
'Deduct your age from 110. Whatever is left is the percentage of your portfolio that should be in shares'. For example, if you are 30 and you deduct it from 110, you are left with 80. That is to say, 80% of your investments should be in shares at age 30. If you are 60, 50% of your portfolio should be in shares. The younger you are, the more aggressive your investment in shares should be. The older you are, the less aggressive your investment in shares should be.

Strategy 5: Avoid I.P.O. As Much As Possible

Some experts may not agree with this. However, the Nigerian stock market terrain has taught one not to be very enthusiastic about investing in I.P.O.s.
The reasons are obvious. The time lag between the time you invest money in I.P.O. and the time you get your certificate and dematirialize is too long. Most people who invested millions in I.P.O. ended up getting a mere 10%-20% of their applications granted. The remaining amount is returned after almost one year of tying it down and the interest paid is negligible. It is better to buy from the secondary market.
However, there could be improvement once the policy on electronic I.P.O. get on board.

Strategy 6: Do Not Keep A Large Portfolio Of Shares

You should determine the number of portfolio you keep in shares. Anything beyond 10-20 is bogus. Your attention would be distracted and you will have less concentration of efforts and time to strategize if your portfolio is too large.
Great investors concentrate their investments to manageable numbers. You wil have more time to monitor companies you invest in if the numbers are few.

Strategy 7: Never Put All Your Egges In One Basket

Be interested in several sectors and invest in best companies in those sectors. Never put all your investments in one company. Imagine that a crisis arise in the future which get the company bankrupt. What becomes of your investment? So be wise. Spread the risk a little.

Strategy 8: Master Your Emotion

This is the greatest battle you will find yourself waging. It will not be that easy for you but you must be determined to put your emotions under control. Do not be greedy and never let fear consume you. If you succeed at putting these emotions at bay, your investment strategies will work wonders.



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